Ensure Approval on All Purchases
The appropriate manager must approve procurement with every purchase order; if you’re in a major corporation, you might need multiple signatures. An omission might be a sign of miscommunication between procurement agents and managers, or worse, fraud.
Organize According to Type of Workflow
If you’re dealing with a large number of purchases every day, chances are that a few could be entered improperly or that a purchase may go undetected if an order form is missing. A disorganized system means you’ll lack the ability to verify transactions, allowing errors to pass through the workflow unnoticed. Keep an eye on the level of activity in your company and organize files for better efficiency. Ensure that all your computer folders are properly labeled and follow a proper sequence in your directory trees and drop-down menus to save the hassle of looking for delinquent documents.
Follow Three Way Matching Protocol
Three way matching is the act of examining purchase orders, shipping orders and invoices to check that the prices, quantities and totals are identical and that procurement transactions are legitimate. Any deviation from those numbers is a red flag that could signal an error in ordering and follow-up or possible fraud. The biggest drawback to the process is that it’s time-consuming, although an automated accounting system can easily eliminate the hours involved in searching for the right documentation.
Remember to Use Adjusting and Reversing Entries
Adjusting and reversing entries are used when a procurement extends from one accounting period to the next. To solve this, make an adjusting entry at the end of the first month and a reversing entry at the beginning of the next month. Automated software can eliminate any oversight related to this by flagging these purchases.
Ensure a foolproof system is in place to confirm orders and verify transactions by getting everyone to follow specific procedures and steps. Keeping lines of communication open between departments will also help in prevention and troubleshooting. These policies and accounting methods will go a long way towards more accuracy and better performance in your business.
This video is more on showing the workflow of Accounts Payable. Here you may see the process of AP as a whole. Enjoy the video!!!
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